Climate Change and the Cost of Living

CLIMATE CHANGE AND THE COST OF LIVING

CLIMATE CHANGE & THE COST OF LIVING

25 MARCH 2025

Australians are feeling the pinch. Cost of living is a major concern – even with the inflation rate brought under control in the last two years – and it’s likely to be the defining issue of the upcoming federal election.

One of the major drivers of cost-of-living pressures is climate change. Here’s how it’s squeezing our household budgets, and why we need to take more action on addressing climate change and investing in the environment to reduce cost of living pressures.

1. Extreme Weather and Food Prices

In the last five years, food prices have risen by 20 per cent. ‘Unprecedented’ natural disasters are becoming more commonplace. Every time a major flood, cyclone or wildfire sweeps through a community, it devastates crops, causes livestock damage, reduces yields and disrupts supply chains. And all of this pushes up food prices.

Climate change is also increasing production costs more generally. Primary producers are needing to spend more on water management, pest control, disease control, accounting for increased crop losses and other adaptive measures, and inevitably there is a flow-on effect for consumers.

2. Insurance and Housing Costs

Insurance costs are being driven up significantly by climate change. Australians are collectively paying $30 billion more today on insurance than they were 10 years ago. The increasing frequency of natural disasters is an underlying cause, with more frequent and sizeable claims costing insurance companies more. Even disasters in other countries impact Australia by driving up the cost of reinsurance.

What we are now starting to see is insurance companies either pulling out of flood-prone areas, including some areas in the Wet Tropics, or charging substantially more.

Housing costs are also impacted. Extreme weather damages infrastructure, reducing housing supply and pushing up construction and rental prices. As demand outstrips supply, Australians are left paying more for housing—whether they rent, own or are trying to buy.

3. Rising Energy Costs

Australia’s reliance on coal and gas for energy, and the industry’s aging infrastructure, are significantly impacting cost of living. Russia’s invasion of Ukraine in 2023 didn’t help. The cost of oil, petrol, gas and diesel has increased much more than other goods. On average we are paying $30 more to fill up a vehicle’s fuel tank now than we were before the COVID-19 pandemic. This directly impacts fuel and power bills. It also puts inflationary pressure on other goods, including food, due to transport costs.

The Future: Cost of Investing versus Cost of Inaction

Some argue that transitioning to clean energy and climate adaptation is too costly. But the price of inaction is far greater. The cost of recovering from natural disasters already runs into billions — Cyclone Yasi’s reconstruction bill was $6.8 billion and Cyclone Jasper’s recovery costs are expected to exceed $1 billion.

Without stronger climate action, future disasters will become even more expensive. The sooner we invest in solutions, the sooner we’ll feel financial relief.

How We Can Reduce Costs and Build Resilience

Households can reduce their carbon footprint and save money by cutting waste, conserving energy and choosing sustainable transport when they can. Broader community action is also essential. We can reduce emissions and strengthen our landscapes and communities by:

Protecting trees and vegetation – Preventing land clearing helps to store carbon, regulate the climate, and reduce the severity of disasters.
Restoring degraded landscapes – Planting trees, regenerating wetlands and rehabilitating riverbanks improves resilience to extreme weather.
Improving soil health – Healthy soils store more carbon and retain water better, helping farmers cope with droughts.
Investing in renewable energy – A faster transition to clean power will lower energy costs and reduce reliance on fossil fuels.

Climate action isn’t just about the environment — it’s about securing a more affordable, resilient future for all Australians. By investing in nature and sustainability, we can reduce future cost-of-living pressures and better protect our communities.

For more information, read ‘Under Pressure’, a report by the Climate Council.